Mehtas, investors in Gadkari's Purti, are also under CBI lens

Manish Mehta – the man who has now owned up to investing in the Nitin Gadkari-linked Purti Group to an extent of Rs 47.34 crore through shell companies – is himself under renewed scrutiny by the Central Bureau of Investigation (CBI).

In February 2004, the CBI had filed an FIR alleging that the Nagpur-based Mehta Group, promoters of Munis Forge Ltd, had availed themselves of credit facilities through a maze of dummy companies. The bank officials involved in this credit arrangement belonged to Central Bank of India, and they are suspected to have allowed the Mehta Group to benefit from credit facilities without a verification of security or property papers.

The CBI also suspects that the credit amounts were partly siphoned off to various other companies. The Mehta Group took the benefit of 22 inland letters-of-credit and three against imports. The CBI FIR had pegged the total amounts involved at about Rs 150 crore.

Is Gadkari on safe ground when it comes to the Purti group? AFP

In February 2004, the CBI had also raided the residential and office premises of the Mehta family, including Manish Mehta, Amarchand Maganlal Mehta, Rajendra Kumar Mehta and Yatin Kumar Mehta.

The CBI has filed the charge sheet in this case and the trial has begun. The Mehta group is named in the charge sheet.

The link to Purti lies partly in the period one is referring to. The FIRs filed against the Mehta group and bank officials came roughly around the time when the group invested Rs 47.37 crore in Purti Power and Sugar. The Mehta group had registered 14 shell companies around the same time.

These 14 companies were opened in the names of Mehta’s employees, Gadkari’s driver and astrologer and even unknown people, using their PAN cards and some wrong addresses. Earnwell Traders and Swiftsol India, which own shares of about Rs 5 crore in Purti, had given a false office addresses in Govind Karman Chawl in Malad East in Mumbai. Chariot Investrade, Regency Equifin and Leverage Fintrade, other investors in Purti, also gave false addresses in Malad East. One company, Sterlight Fincom, changed its address three times in five years.

These 14 shell companies came in handy for the Mehta group during 2009-2010, when they transferred shares worth Rs 47.37 crore in Gadkari’s Purti Group to these 14 companies. The media assumed that since these companies were headless, the Purti Group may have indulged in money laundering.

But RSS ideologue and Gadkari’s `in-house’ investigator, S Gurumurthy, has rubbished key aspects of media reports on the Gadkari affair and said Manish Mehta and his group were genuine investors in Purti. He also said that Manish Mehta was the genuine owner of 14 shell companies.

“I want to make a simple point. Fourteen companies, which were called ownerless, had an owner in 2003-2004. Contrary to public perceptions created by the media, these companies did have an owner,’’ Gurumurthy told Firstpost.

Later, Gurumurthy wrote a two-part article in The New Indian Express (on 12 and 14 November), and had this to say about the Mehtas’ shadowy shareholdings: “Why did the Mehtas not tell the truth to the media? Simple. They were scared of media.’’

The media scare is understandable in the context of the Mehta group’s files being scrutinised by the Enforcement Directorate and even the CBI. These files are likely to be reopened in the wake of the Purti controversy. Firstpost learns that even in cases where the tax authorities had earlier accepted the Mehtas’ investments in the Purti group, a reopening of the investigations has been ordered.

According to Gurumurthy’s article, the Mehta group had held the investment of Rs 47.37 crore directly till July 2009. But they then transferred the shares to the shell companies for trivial reasons.

“Working in a highly backward area, Purti had accumulated losses of Rs 64 crore by 2009. Its loans had become non-performing assets (NPA) in banking norms…Desperate for finance to make a one-time settlement with Indian Renewable Energy Development Agency (IREDA) and banks, Purti sought a loan of Rs 164 crore from a local group, Global Safety Vision Ltd. Global demanded collateral securities and guarantees in addition to Purti’s assets. Both being from Nagpur, the Mehtas and Global perhaps did not share mutual comfort. Therefore, enabling Global to lend to Purti, Manish Mehta had decided to effect a theatrical separation of his group from Purti by parking the group’s investment in Purti in the shell companies and withdrawing the group’s nominee directors in them. Mehtas also shifted the offices of some of the shell companies from Nagpur to Mumbai’’, writes Gurumurthy.

In 2010, when the NPA issue was settled, Manish Mehta rejoined the Purti group as director. And after nearly two years, when the matter exploded, he went to the income tax authorities to declare that these 14 shell companies belonged to his group.

Gurumurthy also says that the corporate world often operates through shell companies, which exist only in name, with no entities as directors. “They (shell companies) are sold and bought like ready-made shirts. This is a global practice’’, he says, adding that these companies don’t attract any legal action so long as there is an ultimate owner.

The shell companies, however, are held as ironclad evidence against Jagan Mohan Reddy, MP and son of the late Andhra Pradesh Chief Minister. Jagan is lodged in jail in multiple cases of fraud and corruption. Even the Supreme Court has rejected his bail.

According to the CBI FIR, 13 companies (shell companies) invested Rs 1,246 crore in Jagan’s media company Jagathi Publications, even when it had not started its commercial operations. The CBI found these companies to be `paper’ or `briefcase’ companies with fictitious addresses in Mumbai, Kolkata and Bangalore.

The key question is: will Jagan Reddy’s shell companies also reveal an ultimate owner like Gadkari’s Purti group did?